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tv   Squawk Box  CNBC  July 12, 2013 6:00am-9:01am EDT

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♪ breaking up is hard to do ♪ good morning. welcome to "squawk box" here on cnbc. i'm joe kernen. becky and andrew continue off today. they will be back next week. i'm told. i'm joined by my colleagues from street signs, mandy drury and brian sullivan. we'll call you sully. i just saw "monsters university", he's a big scary guy played by john goodman. you're big and scary. >> not scary. the whole point of "monsters inc.," he's not scary, big and fluffy and green. or blue. i don't know. >> big and fluffy and green. >> i appreciate the sentiment of what you're trying to do, but the whole fluffy thing, uncalled for. >> is that offensive if i call you fluffy? >> it is better than calling you fluffer. >> john goodman is a good actor, fantastic. i have no -- the show just started. is this how it is going to go? >> we're trying for a new record
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for playing porn music. almost got it there. i'm the short guy played by billy crystal. it is not street signs a.m. >> no, street signs early edition. >> no, the squawk brand is much bigger. >> there you go. will come up every 20 minutes. >> i don't mind that. also people said you have a tendency to kind of hijack the show from andrew a little bit when you're on. i said, you know what, it is friday, you want to do this yourself, i got, like, six papers here. and i have no problem with that. >> sit back, relax. >> july. it is a friday in july. it is a friday in july. >> i'm too tired tonight alpha male today. >> are you really? >> the zzzz male. >> yeah, zzz. >> like a sitting duck. >> someone said yesterday we're shameless promoters for the show. i said, what would you rather? don't watch the show. it is terrible. >> berk, our guy, is big on
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symphony. here we are, i don't know whether you know whether the symphony is working, but did you notice comcast. >> the stock is on fire. >> almost 45. so there is something to this symphony thing. if you want to do street signs and talk about it, that's fine. i'm promoting everything -- i've already done monsters university, that's universal. already started -- >> you've already done that, yeah. >> this could be despicable me 2 if the show doesn't go well. >> monsters university," it is not universal, is it? "despicable me," that's what i meant. "monsters university" who would see that. all 30 dow components closed in the green. the blue chip index, can't keep alled the kids movies and keep track of them, the gain for 2013 is already greater than any year on record so far. the nasdaq posted its best finish since 2000. as for fear in the market, we're talking about the vix, it dropped to around 14.
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and had moves up, but for years it really -- since financial crisis has been trending lower, equity futures this morning, figure they would be a little consolidation but they are green. european stocks, even though they were up before we were yesterday, you figure that they would still, you know, on the back of what happened here do better. the ftse, the cac quarante. do you practice the cac quarante? >> cac quarante. >> you to speak aussie. >> i speak aussie and french. a combination of french and aussie. fraussie. give us your best cac quarante. >> cac quarante. >> sabotage. i know a few -- [ speaking french ] >> oh. >> i think you just asked me to -- >> it is a song. >> i know. but i think you just asked me if i wanted to make love to you. ♪ >> no one said anything about
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love. >> no, love. that's right. no love here. no love, man. >> it doesn't always involve -- >> i'm wearing mascara this morning. >> i already mentioned that. you're a very toned man to have that much makeup on. and i mentioned divine. you do know who divine -- the major asian markets -- right off the rails. quickly. the -- there they are, what happened in asia. they didn't get the memo that things were better. >> they didn't last night. but, i was looking at the tally for this week, and the msci, asia index, which tracks 45 -- well, actually, sorry, the msci world index, not just asia, the world index tracks 45 countries, had its best week since november of last year. >> really? >> yes. >> so that -- >> hasn't done too badly. >> seeing what it is, not presented for what happened. >> yeah. >> just so everybody knows, you're going to wear your jacket, not because you're going against convention on "squawk
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box." because you don't like undershirts, right? i like undershirts. >> my jacket bothering you in. >> no. >> i didn't want to bust out the -- >> it started 20 years ago not wearing a jacket and then went through carl, the next version and now we don't wear -- you don't -- don't do it. no, no, no, no. >> play the porn music. >> no. i didn't -- ♪ >> my baby's all grown up, joe. all grown up. >> this is going pretty well, i think, this "street signs" a.m. >> is anybody still tuned in or did they go off to dog tv. >> we don't have a lot of viewers to lose. no, it's fine. key reed rea key reads on inflation. the june producer price index, the headline, rising by .6%. at 9:55, consumer sentiment.
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if they don't -- if they make a mistake, it is their -- >> will you know when you throw to the schedule? two big banks set to perform before the bell today. jpmorgan and wells fargo. expected to post earnings of $1.44 a share. on revenues of $24.8 billion. among the things that analysts are watching, signs of capital markets activity and also growing fear fooes. we all know about those. what do you think? we're giving you the chance to play armchair analyst. call it what you like. peanut gallery, whatever. interact with us. go to our facebook page, vote on whether or not jpmorgan will meet, miss or beat expectations. we'll actually bring you those numbers from jpm the second they hit the table. not the second second but the first second to hit the table. and don't miss jpmorgan ceo jamie dimon in a cnbc exclusive.
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this is a big thing, right? he'll be with jim cramer at 10:00 a.m. eastern. as for wells fargo, analysts are looking for earnings of 93 cents a share on revenues of $21.2 billion. we'll be talking more about the financials with analyst chris whalen in the next half hour. all those things coming up. >> that's right. the other big financial story this morning, a push for a modern version of the 1933 glass stegele act. the original act was passed after the stock market crash of '29, separated commercial banks from investment banks. couldn't do the same thing. many of the core provisions were repealed in 1999. now democratic massachusetts senator elizabeth warren is teaming up with arizona republican john mccain and two others to introduce a new version of glass stegele. we'll speak with senator warren this morning. a year ago on squawk, goss and the father of the so-called supermarket bank sandy weil
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called for banking up the banks. >> what we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, and have banks do something that is not going to risk the taxpayer dollars, that is not going to be too big to fail. >> among those strongly disagreeing with weill, dick kovacevich. he'll join us later. that quote from sandy weill sent shock waves because they said here is the guy that was the architect of the opposite. basically admitted that they made a mistake. >> spawned some sarcastic references that you can imagine. it is like so and so suggesting this. you think of --
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>> like the yankees suggesting that we should lower pay in baseball. >> i'm not going to say it is like madoff giving us some ideas for how to, you know, manage money. and i'm not saying that sandy weill is anything like madoff. he's the architect of big banks. it is just sort of weird and dis disingenuous that he's -- now he doesn't want anyone else -- you're at this point, i don't know. do we need dodd/frank if we do glass stegele. a lot of people think credit is still constrained. you put it on top of dodd/frank. >> i think this bill reminds us why wall street was fearing the elections of the senator elizabeth warren in the first place. whether or not it will pass is a completely different question. >> the margins of it passing are fractional. >> fractional.
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>> you say she's a senator. i go when is the last time something a senator thought of actually knead into lmade it in. it is very collegial and they feel -- they get good tables at restaurants and they have an entourage, but they don't really -- they gist sort of think a lot, nothing really happens. >> cramer has been saying how he's getting nervous over the financials and the head wind of regulation. we don't need more regulation, crimping the banks. >> i think in a perfect world for elizabeth warren that banks wok like utilities. they would be semipublic institutions, which would be, you know, i don't know -- no one would ever capital formation would be ground to a stand still in this country. there are regulators that have in idea that too much regulation is a problem. >> let's look at the global markets report now. ross westgate is standing by in london. ross, how is the day over there? >> mandy, well, we're okay going through the last trading day of
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the week. we had a nice kick from the close of u.s. markets yesterday, this fed through into asia and european trade right now. pretty much at the best levels of the day. nearly 73 advancers outpacing decliners. you see the growth for the best numbers into the trading session here. that means as far as the ftse 100, after gains yesterday, 38 points, up another 36 at the moment. half a percent, xetra dax up a percent. you'll see spain and italy a little weaker today. spain down .6%. portugal up, but on concerns emanating from portugal. the president, remember, portugal in a bailout that is based in june of 2014. the president earlier this week came out and said maybe we should have some fresh elections at the beginning of 2014, which threw up into doubt whether you can complete the bailout program. the troika said we're not going to advance the next tranche until you sort out the politics and the prime minister saying all parties, we need to work on some kind of coalition to get
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everything together. though the ecb is fairly relaxed. couple of individual stocks worth looking at today. the uk, invensys, the british engineer, up 15%. schneider electric has come out and confirmed they're in preliminary talks mainly to offer -- talking around 505 pence a share, just off that price at the moment. here is the story also with a lot of take. these two companies serco and g4s, these shares were down heavily yesterday. they're down again today. serco off 8%. g4s off 6%. they have been overcharging the british government millions for tagging criminals that were nonexistent. some so-called criminals were even dead. that's a scandal in the uk. keep your eyes on bond yields now. we're seeing gilt yields, treasury yields lower. in spain and portugal, still elevated. keep your eyes on that, around this psychologically and also
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physiologically important 7% level as well. not sustainable at those kind of levels. we're trading higher. back to you guys. >> all right, ross. thank you. i can hear the difference now between you and mandy. some people can't tell the difference between an aussie and a british accent because you came from there. at some point. >> i originally, yeah. >> not you. >> well -- >> aussies. >> yes, aussies originally came from -- well, not all. >> and then there is south african and zimbabwe, they all sound -- anyway, the flurry of activity in washington this week. we talked about the modern glass stegele and then the house passing the farm bill without food stamps. the continuing battle over student loans. and then we have got also the -- the house is going to try to block the individual mandate. nice that everybody does things that they know aren't going to get done by the other side. so much fun. let's get jim harwood to talk about some of the infighting and what is happening in washington.
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going well. business as usual, john. everything is passing things that have no chance of ever becoming law. >> joe, washington, it is -- we had an incredible demonstration on the senate floor when the two leaders, mitch mcconnell and the republican leader harry reid, the democratic leader were fighting over the potential for changing filibuster rules which democrats might want to do to get some of the president's appointees through more quickly. republicans have been holding them up and it triggered this bit of trash talk which was greater than i've seen in a long time. take a listen to this. >> these are dark days in the history of the senate. we witnessed the majority leader break his word to the united states senate. >> no matter how often my friend rudely talks about me not breaking my word, i'm not going to respond talking about how many times he's broken his word. >> what the majority leader has been saying here all along is he wants the confirmation process
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to be speedy, and for the minority to sit down and shut up. and if we don't pull back from the brink here, my friend, the majority leader, will be remembered as the worst leader of the senate ever. >> there is lots of time for name calling. i'm going to continue to try to speak in a tone that is appropriate. name calling, i guess he follows -- i hope not -- a demagoguic theory, that the more you say something, it falls, people start -- >> how did you like that, joe? >> it reminded me of not only the house here, but maybe the lower house over in great britain. but, still, you saw those guys, they weren't looking at each other and still -- still senatorial the way they did it. but -- >> you think they went to the bar afterwards and had a drink? >> who knows. i love harry, though. he's classic. if you own a casino, you're in good with him. i know that much. if you're in las vegas, you love
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harry reid. it is that simple. he didn't actually say on your tombstone you ruined the senate, but it got close to that. >> there was tombstone talk earlier in an exchange a few hours before. >> wow. >> i love the way that mcconnell said my friend is going to go down as the worst leader in the history of the senate. >> and then harry said, i'm not going to respond. if i were to respond, i'd say -- >> i'm not going to respond and talk about what a lying demagogue you are, yeah. >> i know. but it wasn't that bad. but -- >> to get to the underlying issue, joe, you may remember we were in a similar situation during the 2000s which george w. bush was president, republicans were threatening to invoke what they call the nuclear option, change the filibuster rules. now democrats are doing just a simple reflection that both of these parties are in full out
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partisan war and use every tool they have got. and the filibuster is one of the best tools that a minority party has got to stop the party in the white house and they're going to keep using it. i suspect that they will somehow work this out. and that harry reid will not as republicans and bill frist was the leader then did not go nuclear in -- during the 2000s but we'll see next week. there will be test votes on a series of the nominees and we'll see how republicans respond. >> can the majority get rid of the filibuster rules? >> yes. >> filibuster that rule. when they're trying to change the filibuster, i would filibuster it. >> there is some dispute over that. both in terms of rules and in terms of senate traditions, but it is -- in both cases, when they were first republicans and now democrats, we're talking about changing the rules, they can change the senate rules by a
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simple majority. and so they would be using senate rules to change the filibuster rules. >> then you can't get anything through the house. that's what i don't -- that's weird -- or not everything -- just the senate? >> the filibuster is not the only thing barring action in washington. >> some confirmations can be just senate, right? that's what they're talking about. >> yes. >> yeah, exactly. at issue here are nominations for the epa, for labor, as well as for the national labor -- >> what should i say to elizabeth warren? isn't this -- we got dodd/frank. if we -- we wouldn't need dodd/frank if we did glass stegeal, would we? >> probably not. but i don't think her bill is headed to become law. >> should i ask her why she's bothering? they all do this, just for -- what is it? >> well, look, you know, people disagree. there ray lot of things that get
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proposed in congress that don't go anywhere. i believe john mccain proposed this bill as well in the past, but no, look, there are people who think that there was a fundamental problem in -- during the clinton administration when they removed the barriers and they're going to try to push it back. but i think the world moved past that. >> that might be our next fed chairman, same guy. right? larry summer. >> could happen. would that make you happy? >> i like larry. i want my daughter to get into harvard. a friend of mine, so -- all about me. all about me. >> it comes back to you. >> anyway, thanks, john. >> thanks, john. coming up on the show, financial earnings, congressional testimony from ben bernanke next week, and a whole lot more. let's talk about the events likely to drive stocks in the coming days. it is all coming up next. first, a deal just announced, chip designer spreadstrom, very difficult word to say. we talked about it --
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>> we brought it up on "street talk." this is why you need to listen to "street talk" at 2:00. >> spreadstrom. >> what did i say? >> spreadstrom. >> that's why you're working on it. >> you're used to being up at this hour. we are not. this is difficult for us. >> yes, both of us were working last night, up early this morning. it is being acquired by china's singwa unigroup. >> you nailed that. >> for $1.7 billion. can't speak english, but my chinese not so shabby at 6:00 in the morning. stick around. .
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a lot of cultural background. you know mary tyler moore. we have blue green coming on. i call him lou. the dow and s&p 500 both closing at all time highs. joining us now -- i get to do it. lou preen and john lonski. i sat next to you in -- admit it -- makeup. the makeup girls said, like in an operating room, we have done all we can. we have done all we can. and they let him go. what do you think, lou? can we add to the gains by the end of the year? >> you know, yesterday i thought was, you know, aside from the
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fact it was up 20 handles or something, the s&p, i thought it was important because we gapped over the high the day before the fed meeting, before june 19th, when the market started to really go down in ernest for a few days after bernanke spoke. being above that level, the high -- the all time high at 87, not very far away. technically there is nothing not to like about it right now. i think i can have all sorts of worries about how it reflects the economy, et cetera, but looks, you know, there is nothing to complain about at the moment technically. i looked at it and we have been waiting for -- we all have been told that the fed is providing the bridge to when the economy gets better. and yesterday's move, was it just that the fed is going to be there or based on earnings, are they going to be okay? the fed's action eventually will have an effect on the economy or just pure $85 billion a month, let's buy more stuff? >> i think it is like one-third
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the realization that business sales, top line revenue growth is doing better than anticipated, improves the outlook for earnings. and two-thirds would be the expectation that the fed is going to be there to prevent the economy from falling apart. they're going to keep interest rates low enough so that sales and profits can grow sufficiently. >> before the fed started tapering, people said when bonds finally start -- when yields start backing up, there will be an initial reaction. but then because they're backing up, because for good reason, eventually the market -- it looks like it is moving according to plan. >> that's what history tells us. if we go back to the starts of the two previous extended tightens of fed policy, june 2004, prior to that, february 1999 we find that in both cases equities didn't peak until years later. peaked in october 2007. prior to that, march of 2000. if the fed is right and the
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economy is getting stronger, so that there is reason for higher interest rates, that ought to be good for equities. >> it should be. lou, yesterday, what was really interesting is a backing up against the record highs. we saw individual investor sentiment turnbullish, whi ibul depresses me, they turn bullish until record highs again. what is the individual investor do at these levels? >> that's not my ability to say what someone -- how someone should invest. i agree with you oftentimes when it looks really good, that's when you want to like it a lot. and that happens at the highs. and, you know, one of the things to respond to what john just said, you know, the previous two qe programs, you know, when they ended, the market was also at the high. and then it turned down each time. and, you know, part of it was for the reason that the economy pulled back because, you know, the economy wasn't ready yet to go it on its own without the fed or at least that's the way the
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stock market and the data appeared. or just there was that, you know, that extra psychological impetus of the fed buying that kept pushing us higher. as we stop this time, whether, you know, it is not necessarily because interest rates would go higher, it is just, you know, can the economy carry on once the fed pulls back. and i still think that's an open question. but i still think, you know, the idea that the fed is leaving anytime soon is just -- that's not true either. >> john, can the economy manage and handle this surge in rates? >> we're going to find out. we're going to keep a close eye -- >> not an answer. what do you think? >> i think rates have to move slower still. we still have subpar profitability and in the past, when we had midrecovery slowdowns by profits, profits were eventually rejuvenated by lower borrowing costs. i wouldn't be surprised if the ten-year treasury yield soon
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moves back to a range of 2 to 2.25% to help provide some impetus to earnings. >> you believe if i'm hearing you right, because we talk jpm and wells fargo, earnings out later this morning. you're also talking about the impact of higher rates on corporate america because they have been beating the street largely by cutting costs. this is going to increase their costs on the borrowing side and you think then make it harder for them to beat earnings. >> i think the more important story here is what are higher rates going to do to sectors like housing. we have seen quite a drop by mortgage applications where refinancings, they're down sharply, 40% from a year ago. that's going to show up in consumer spending numbers 3 to 6 months from new. >> had such a rapid rise in rates. surely at some stage it will taper off, even if we get a rise -- >> i think they'll be slower. we'll see a topping off of home sales, mortgage yields don't
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come down. >> the economy is getting better. you don't think the economy will get better. >> i think rates got ahead of themselves. i see them in a range of 2 it is 2.25%. gdp is in the second half, 2.5% on average. next year, probably 2.5%. and moreover, the economy is not going to grow rapidly enough to increase inflation risk. and as long as inflation risks are well contained, the fed has a great deal of flexibility as far as policy is concerned. >> won't get out of control. some people thought it would get out of control. the $85 billion would haunt them and rates would go up too much. >> i think we're seeing signs that the market may be overreacting now. rates have to come back down. at this point in time, the market is trying to find out what the equilibrium ten-year treasury yield is, what -- where does a ten-year treasury yield have to be in order to assure adequate economic growth. >> thanks.
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lou, thanks. are you taking the makeup off or -- >> you -- >> you look good. you should just leave it on. >> i'll be in the hofs, but it would look kind of funny. >> people will say, have you lost weight? >> yeah. i may have to go to an operating room or something like that to get the stuff off me. >> becoming a big growth industry, a new revenue driver for makeup companies. >> we could start something. >> metro sexuals. >> speaking of metro sexuals. >> 30 minutes away from quarterly results from jpmorgan chase. we'll preview the numbers. we'll get his take on his proposal to break up the banks. and don't forget to vote in our armchair analyst poll. go to our facebook page and tell us whether you think jpm will meet, miss or beat expectations. oh, and by the way, jamie dimon 10:00 a.m. today. you'll not want to miss that as well. a lot more to do. stick around. (announcer) at scottrade, our clients trade and invest
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welcome back to "squawk box." elizabeth warren teaming up with john mccain to push for a new glass stegeal bill that would break up the big banks. two of the nation's biggest financial plays will be reporting quarterly results, jpmorgan and wells fargo. joining us is chris whalen, executive vice president. this whole glass stegeal thing, will it even pass? is it moot? >> i don't think this bill has a
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chance of passing. what i tell people about this, when we put the volcker rule in place, we went down the road to glass stegeal. we restricted the activities of the banks. if you look at jpmorgan, after the london whale fiasco, that whole portfolio is passive. all the people working in the office had been fired. there is less liquidity. they were a marketmaker. look at last month. part of the reason june was such a mess after chairman bernanke's statements is that the dealers can't deploy capital in the market for their own account anymore. given that, you know, if we're not going to take away the volcker rule restriction, we separate the two houses. want all that capital in the dealer available to the market. >> so in a hoiypothet cal situation, doesn't it tie their hands behind their back? >> by limiting activities, you're halfway down the road to glass stegeal separation of the
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house, but you sequestered all the capital off to one side. so you can't trade that. that's a problem. >> i am going to defend this move. because somebody has to. >> i support it. i have no problem with it. >> good. let's go through the reasons why maybe it is a good idea. sandy weill thinks so. aside from that, banks should be able to be profitable from making loans and collecting payments. that's what a bank is. if a bank can't be profitable, making loans, potterville, collecting payments, it should not be in business. >> let's remember why we're here. the fed allowed the dismantlement of glass stegeal and allowed the creation of the ghetto we call the over the counter derivative market because core banking wasn't profitable. if you separate them again, you'll have a narrow bank that will look a lot like the electric utility and then you have a dealer with a lot of volatility. >> i'm not saying i agree with it. sorry. i'm not saying i agree with it. but shouldn't a bank, a true
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bank in its purest form be a utility? you got addicted to the crack of derivatives trading, so they didn't have to be profitable, they used that as a lever, stored deposits with us and we'll trade your money. >> and as a customer of banks, i work for nonbank company now. there is a premium in terms of getting credit from the big houses because of their volatile activities. if i was just dealing with a narrow bank that just lent money, it would probably be cheaper. >> okay. since we're playing the devil's advocate here, let's play to other depositors. during the era, there were no systemic banking crises like in -- >> let's remember -- >> is this something that will prevent further crises or a better way to do it? >> we had already had it. got to remember when senator glass wacced on to the floor of the house with the glass stegeal members, he said, here, vote. the country was on its knees. fdr had done everything he could to make the crisis worse, and
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the result was glass stegeal. it would be very difficult to pass that kind of legislation today. >> and only 37 pages as opposed to how many pages for dodd/frank. >> you saw this during the debate there were several votes on these issues and it went down. i'm not saying you can't get this done. this legislation, as it is today, it is kind of an interesting talking point, no more. >> okay. in terms of the investmentability of the banks, should we be factoring this in? >> no, what i think you got to be watching is volatility. what i'm waiting to see from jpmorgan this morning is how much did the chaos in june hurt their investment book such that you'll see losses, for example, on the available for sale category and that will ripple through earnings and their gap capital. so, you know, the problem is the volatility of the dealing side versus what should be a boring business as you were saying. >> your banking should be boring. i'm sorry. they try to sex it up, they got other stuff going on. banking at its core is a boring business. should i lend you money? will you pay me back?
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yes or no, okay, what is your credit risk. i'll loan you this much money. i get paid back slowly over time, go to the beach. that's it. >> if you look at the basel capital guidelines, they're trying to make universal banks safe by limiting lending. we shouldn't have the kind of restrictions -- my firm, mortgages, we fund off banks. now the basel people said, one in four family mortgages aren't collateral and leave the derivatives alone. >> you can still lose in commercial lending, housing bubble, all the same stuff can still happen. wasn't the -- >> i agree. not everybody -- >> it wasn't just the investment banking activities that got us -- >> the biggest source of volatility in our markets is u.s. government. >> you need to think you're going to get your money back. you need to do some effective underwriting. >> i'm playing devil's advocate from the other side, agree with you in some ways -- >> i believed you.
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>> we're journalists, we look at both sides of the coin, negative and positive. >> when i said i believed joe, if a bank cannot make money -- >> you told me. >> good. you can argue anything at anytime. i can't believe -- >> i went to law school. >> there you go. >> if you say you're trained to argue both sides -- >> but you say you like me, can i put that in the bank? not really. >> look at it this way -- >> let me finish my point, which is this, okay, if a bank can't make money making loans, fine. but i will say this, if you remove the other profit side, trading, as dangerous as that is, credit is going to constrict. you think it is hard to get a loan now, right? it will be doubly as hard, i believe, if you take away the other profit center -- >> i disagree. >> why? >> for one thing, i think we have more competitors. i think it would be very healthy it take the merrill lynches out of banks of america. that would help the marketplace.
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the crazy way the regulators are trying to balance risk and return with all these regulatory structures that joe was talking about, it has the effect of actually making credit more expensive. and i think unfortunately, you know it a schizophrenic approach we have. we look at the crisis we just had. what was the problem? securities fraud. we have done almost nothing about that. we talked about capital and how we needed more capital in the banks. we needed to stop doing silly things and -- >> securities fraud, would have been able to prove that -- >> but, remember, we can't prosecute them because of systemic risk. >> lightning quick. >> there is a difference between believing aig can make good on its -- >> i'm talking about mortgage-backed securities, joe. >> it could be -- >> come on. >> someone would have been -- they get approved -- >> wells fargo and jpm ahead of the earnings today. >> flat revenues.
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no revenue drivers in this business right now. that's the key thing. been a cost cutting exercise. we'll talk about that on monday. >> if there was fraud there, there was fraud in fannie, freddie and -- >> they were the enablers. >> right, exactly. >> thank you so much for joining us today. great stuff. thank you very much. and exciting stuff, guys, we have been talking about the new glass stegeal bill, being introduced by, indeed, massachusetts senator elizabeth warren. she's going to be telling us herself about the new bill aimed at breaking up the megabanks at 8:30 eastern today. we're also going to bring you the quarterly results that we have been talking about. jpm and wells fargo as soon as they hit the tape. do not miss jamie dimon in a cnbc exclusive. that will be with jim cramer at 10:00 eastern today. >> i have more. i was relaxing already. first, julia bore citizen jours
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the alan and company media conference is in its third day of sessions, full of heavy hitters in the media and technology space. so much fun. i love sun valley. julia is out there. have you been to the piode. is that a place where you would go? >> yes, we love the pioneer. they have giant potatoes. the line last night was too late. we had to -- couldn't wait this line so we could go to bed early and make -- >> i could make a call for you. i could make a call. i love -- it is great. but sorry you can't get in. it is hard. >> there was an hour wait. an hour wait, yeah. >> that's too long. did you tell them who you were?
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>> joe, doesn't work for me. for you, it would work. >> i ask for a table near a waiter. with schmidt, huh? >> that's right. on the heels of microsoft's reorganization announcement yesterday, we sat down with google chairman eric schmidt. he was wary of commenting directly on microsoft, but said the changes that microsoft are making represent a key industry wide shift. >> every company is responding to the new cloud computing. we're having great success with google apps and google docs in enterprises and microsoft must be responding to that in some way. >> in addition to the microsoft news, we saw immigration stall. that was a topic he was quick to vent about, joining dreesen and zuckerberg in their outrage. >> the policy of america to deny visas to technically capable people who have been trained in
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the united states and ship them to other countries where they create companies that compete with america has got to be the stupidest policy of all of the u.s. government policies and being held hostage by other issues. >> now, schmidt also mentioned his frustrations about the nsa prism controversy. they did not have special access inside google. schmidt said he's frustrated the company has not been able to actually talk about the nature of the government request and he thinks there is a crucial need for more government transparency. now, joe, i asked him if there is going to be another shoe to drop on -- in google's involvement on nsa situation and he said not that he's aware of. guys, back over to you. >> julia, thank you for that. in the meantime, coming up, a disruptive change in the world of energy and aviation. all at the same time. a company involved with the completely solar powered aircraft. no fuel involved here, guys. and he's going to be joining us next. if you're serious about taking your trading to a higher level, tdd#: 1-800-345-2550
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. >> delivering alpha. >> i will be interviewing nelson peltz. he's one of those minds you want to think of the way he thinks of activism and takeovers. we will try to figure out where he is going next. >> the biggest investor event of the year. delivering alpha, explicit coverage all day wednesday starting in ""squawk box"" on cnbc. >> all right. this is very cool, especially for a friday. a completely solar powered aircraft landed at jfk airport completing the final leg of its historic journey across america. the aircraft weighs less than most cars. it did not use a single drop of fuels.
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solve has developed many of the polymers used. the group ceo an director jean-pierre joins us. welcome to cnbc. what is the point of your journey? what were you trying to prove? >> thank you very much for joining us. in fact, what we wanted to prove is that the chemical industry in solvay can make this possible. yes, someone can fly an airplane from san francisco to jfk without a drop of fuel. this is the best demonstration we can think of a demonstration in the innovation at solvay. >> so it's a little tough to see. i'm going to show our viewers some of the parts that were on t the plane and this is a nut and bolt made of plastic polymer. this is steel or iron. you are trying to prove that can
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be as strong and safe was we normally use now, correct? >> very simple. what i have in front of me, it's fragile and breakable. usually it is covered with a thick layer of glachls on the plane, this is impossible. it is very thin micron, polymer film. we have more than 6,000 parts on this airplane which allow us to two two things, manage energy efficiently, produce as much energy as possible from the sun power, from the sun light, very effectively, we have the most effective batteries in these airplanes twb the same parts in metals. so again a a very good example
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of what the chemical industry can do. >> i think that's the best thing about what you are showing us jean-pierre. i figure a lot of these components can be used by the existing commercial aircraft industry. because i don't see the commercial applications for this. because the whole point of flying is to move something from one place to another and are you holding down all the weight. will you not be able to make me out of a lighter composite material. if you wanted to move people or 48 or something like that, it's not going to be done with a solar powered aircraft. >> you should see that as a lab. it should be a very advanced lab to demonstrate advanced kaip capabilities. you have some in your car. have you them in commercial aircraft, bringing safety, bringing light weight. have you them on some equipment. so it's all around us and what this project allows us is to go one step further, to use new materials an once again to zlat, yes, we can ask more for comb
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industry and the chemical industry has lots to bring our every day life better, easier and more efficient as far as energy is concerned. >> certainly, we are hoping it will be safer as well when it comes to aircraft. because fresh in our memories is the devastateing airline crash just a week ago. i believe that you think that two of solvay's products that were in that airline actually contributed to saving lives from the crash. why and how? >> the fact ris made lot of discourse in the past years for plastics which can be used in aircraft and which would guarantee in case of an accident as with the ones we see in some countries go t. plane won't fly immediately, yes, what we have reports we are getingfrom the faa, sure. >> jean-pierre, thank you. thank you. we appreciate your time this morning. thank you very much. good luck, coming up, we got j.p. morgan result, the numbers
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and the instant analysis. .
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. >> j.p. morgan is out t. company has beat for four straight quarters, it looks like five, estimates of $1.44, revenue 25.21 billion vs. 24.837 billion him now, brian, you've got estimates for some of the metrics of this bank that aren't like revenue and earnings per share. you got a net interest income estimate and it was below? >> yeah, the one thing that stuck out to me is net income. the impact may be of higher
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rates. it's early. net interest income came in around 10.9 billion. the estimate that i saw on fact set was about 11.2 billion. some are weaker. you talk about the consumer. you guys have hit on the consumer forever. credit card sales volume was 105 billion which was up 10%. >> billion? >> we always say, don't bet against the consumer. >> yeah. >> this is why. americans love to spend and j.p. morgan chas benefitting from it. >> that's a new high where it is right now. it's as high razz i have seen in a long time. i'm going back '03. >> better than expected eps and revenue, we are up 1.2%. >> 20 year, it looks like it
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might have a little ways to go back. very close. but i'm staying in the 30s and 40s just forever. finally getting some traction some far, so good. you have to call that at this point it moves all around after people are able look more closely at some of these metrics. brian, you dwgave us one. people can follow it that closely if the quality isn't what it should be. >> terrible. not as terrible as thought. >> look already it traded off the bottom line and top line beat. but who knows -- then on top of all that, there is going to be oous usually a conference call. in this case, cramer is going to have jamie diamond on. you will probably get a lot more out of. that it's on, isn't it on four hours before the start of "street signs?" >> three hours in mountain time. >> what about pacific time, brian? >> two-and-a-half.
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>> can we boost it in the eastern time. >> people don't have time. that's why they're one of the happiest nations in the world. listen, i want to give a shout out to jamie diamond about one thing, they hired 56 veterans since 2011. good for them. >> absolutely. let's get a quick check out for j.p. marken results. the futures, yesterday, the dow an s&p closing at record highs. the nasdaq not a record high, but very, doing very well nonetheless. i think about a 12.5 year highs. you got as we can see there, their valued implied at open is marginally to the upside. we are going to be keeping our eye on shares of dell as well, comments from investor carl icahn suggesting a new offer for dell may be on the way this morning. a dell special committee has rebuff ed icahn's value.
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tip designer spreadtrum will be bought at a 17% year premium over yesterday's close. elsewhere. best boy meantime is launching a two-day ipad trade-in program today. consumers can swap working models of the ipad2 or generation of the ipad and get a best buy gift card. that cams off success with an iphone trade-in program just last month. >> laced with plastic and pigma, it's good beer. >> joining us on set jim o'shaughnessy. my china bashing gets old. doesn't it? >> you got to pick a few country. >> i was on france for 20 years, but i love france and i got a freaking co-anchor that speaks
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french. >> mavendy speaks french better than i do. >> it moved me when you did it. [ speaking french ] . >> it means it's important for business these days to speak another language, joe. >> the language i love. i will jump across this desk if you don't stop it. >> you kind of had trouble with english. >> oh. >> oh! >> wow! pow! >> across the table can i give you a fist pump on this q1? >> jim o'shaughnessy, he was going to be guest host, now this will be his only segment. >> i think you can sigh good-bye now, thanks for your time. >> it's great being here. >> ian, focus on you this morning. no, ian up, again, i mean the slightest bernanke walks differently and the marks react. this week, was there something significant that put us at new highs again?
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>> i don't know the marks heard him say in the q & a the economy still needs a highly accommodated policy, of course, bernanke thinks it's entirely consistent with tapering in september. the market heard it goes up to the moon. so there is, you know, he's juggling. i don't think he wanted ten-year notes to be at 260. but he's happy the market is presumably happy, anyway. he's gained a bit. he's lost a bit. it doesn't look as bad as it did a month ago. i think they are on course to do the tapering. >> we do what he says. has he in the last two months, has he gone back and forth or have we focused on. has it been the same message? >> his move. he's definitely moved. he introduced this 7% idea for the unemployment rate at which they would stop doing the qe data later this year in a press conference in june. there was nothing later this year. he set it. so he's moved. he's definitely moved. the market has gone slightly
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haywire. we have a different response in the bond market to the stockmarket t. bond market is nervous, rightly. >> but is there a communication problem? it felt as if there was almost something for everybody. if they can latch on to that. i fell he was back tracking, maybe he was a little surprised if not a little shocked by the reaction. you think it's only ap comment? >> he must have been. one of the things here i think bernanke is keen on this idea, what matters for the mark is to stop the treasuries the fed holds. the market thinks it's a flow the fed is buying. so bernanke felt safe saying he was going to stop the flow. the market heard slow down the flow. sell the treasury. >> why are you shaking your hip, brian? >> i'm confused. bernanke talked about interest rates, jim. he talked about being accommodative. which is interest rates. we're focusing on taper. which is different. it's tapering. by the way, we did this on "street signs."
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>> when is it on? >> 2:00 p.m. eastern. nobody thought we would tighten. if you go to fed fund futures. >> i agroi, basically what he is saying the fed wants everyone all in on risk assets. anyone trying to put money away in a conservative cd. >> can you be our stock? i tell you what i'm seeing? i saw the market move in the last two years and it confounded anyone who wasn't it. it felt like it had moved too much to get in. so all the people we had coming on always said it's already said i'm not going to buy anything. it wasn't enough to say i'm changeing my tune. here we are at new highs. think they ready to say, no, it's extended. they have another leg up here as they are hesitantt to get in here as well. are we back to the races?
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. >> they're as mysterious as the lock necessary monster. >> we have huge gains. it could turn into a huge cyclical bowl. >> we published a piece saying a buying for equities. what we heard was crickets. what everyone looked at us like we were insane. they said, you know, why would you ever say buy stocks here? and basically, we get that from looking at very long data series. and so -- >> j.p. movingr morgan is down now. >> they are knocking us down. what do you think? you know, you said the market would digest. >> slowly, i don't know. you know, and it's not unusual to see it and then it goes at the end of the day higher anyway. >> j.p. morgan will be speaking for that obvious move as well. >> would it be too much to show every cable system in the country and what the actual channel to get "street signs?"
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>> what do you say now though? you were saying back then this was a generational buying opportunity? what are you saying we are being again at record highs? . >> one of the thing we did was look at the 50 worst ten-year periods back to 1871. what we found was february of '09 was the second worst ten-year period since 1871. more important to us was what happened one, three, five, seven, ten years later. what we found was once you got to three years, there were no negative numbers. so in every one of those 50-year periods, after, you know the destruction of u.s. stock price, the next three, five, seven and ten were very, very positive. so we think we're in the middle of a virtuous circle where equities can continue to do well and we believe passionately that the instrument to really keep your eye on is the long bond.
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we think anyone in long bonds should get out of long bonds and go into intermediate five year at most bonds. once qe stops, that's going to be the end of the party for the long run. >> brian, this is just a wire about j.p. morgan. they're saying the rate of the nation slowed. it was still up 7% him i'm sorry, 12% from a year ago, but in the first quarter, mortgage origination were up 37%. that's one thing the wire, also, did you see they brought back a billion-and-a-half that had been ready for loan losses and when they do that, they bring back money they had reserved. then it boosts earnings. some people say that's a dollar 60. for whatever reason, it's now down. >> i think you made a good point, joe, which is that the stocks of all these high, right, so we already had this multi-year run up in jpm. it was weak. there is obviously going to be concern about mortgage originations with higher mortgage rates. but that's a different issue.
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but, jim, i completely agree with you on stocks in '09. it was a great call. >> are you agreeing or is the devil's advocate agreeing? >> it was you. >> i can be the witness. >> i wasn't always on this network. however, if people followed me. >> i heard it was very negative. up from the mayor. the we were tradeing single digits. i will retire, if stocks aren't hier higher then, we are living in caves. it's a mccormack mccarthy value. >> are we overvalued right now? >> i think, hold that thought. after what you said about me. >> five seconds left. up next, j.p. morgan. we will talk more about it. stick around, you are watching "squawk." owe
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owe. >> three men need to keep a secret. dropping some knowledge this morning. ben franklin. >> ben franklin. >> can you google that? >> he's not going to be mad? >> you are wrong. here's what our armchair analyst thought, j.p. morgan said 24% said it would mooetd meet expectation. 60% said beat.
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you were right. 16% said miss. that's on the metrix of eps. joe, you pointed out as only you did. >> you did before i did. but once again, you sold that like you were interested. >> i am interested. i do care. i do care. let's get the street's reaction, calling it to the squawk news line the managing director and bank analyst. anthony, almost every metric we are seeing here is up, up, up, the stock is down, why do you think? >> i don't think the street likes the way they beat. we had some fwhegtives in the quarter, primarily net interest margin, net interest income. loan growth. about 15% of that headline number probably is sluff. >> you mean bringing back reserves, things like that? >> well, there was about 5 cents from credit spreads tightening during the quarter dba adjustments. there was about 10 cents if you look at it on whole about reserve release that shouldn't have been there or was not going
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to be necessarily repeated next quarter. >> that's 15 cents. that's a buck 50. >> a buck 45. >> puts you in line with the street. >> you recently upgraded the stocks to a strong buy. is there anything that would change your view on that, sir? >> no, it's a challenging environment you want to own companies like j.p. morgan because they can be in these tough times. they also had excess cash on the balance sheet this quarter. i think they will benefit from the higher interest rates and having that cash redeployed as we go into the third quarter. >> anthony, if you talk about the net interest margin, things impacted by higher rates, how are they going to manage this corner with a sudden and pretty violent spike in the ten-year note deal? how will they manage that when it looked leak they wouldn't be able manage it last quarter before we had the move? >> j.p. morgan has been relatively stable. we have as to wait for the conference details. i think there was an increase in
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liquidity relative to loan growth. with esa you the margin come down. net interest income missed by 200 million. that's a couple pennies for j.p. morgan. as we go forward, tail have the ability to grow loans and grow the investments securities portfolio at a higher rate than the first half of the year. should benefit net interest going forward. i wouldn't be surprised if this level was the low point for the year. >> considering the backdrop, do you think j.p. marken is best in show? best in the sector for you? >> tops in class, perhaps, best stock, best stock price, you know, for the second half of the year, we'll have to wait and see, you know, what happens. i think the next quarter will be key for the industry. the group has moved a lot. i have as we speak eight stocks above my target price. we've had a tremendous rush. i think this quarter is a very
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solid quarter. certainly, you know, it doesn't make me question the strong boy rating. the stock has done real well. it does make me question whether or not we will have good enough results to sustain the rally we had in the couple weeks prior to the earnings reporting season. >> mind you, your target price is $64 bucks. that's your new target price of $64 bucks. according to what it is right now, there is quite a bit of upside. >> i think j.p. morgan is going to benefit from the higher rates. from an improved economic outlook for the sec half of the year. they continue to manage the capital market side of the business, as well as anyone tradeing the fixed income side. yes, the target price isn't based on an astro nominal. the industry is tradeing 13 tiles forward. we get to 64 with a 10.5 multiple. >> it's a real pleasure. thank you very much for joining us, anthony. a quick programming note, j.p.
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morgan chase, jamie doimd. that guy will be on "squawk on the street" 10:00 a.m. eastern time. jim. i want to go back to my point my way too long question before the break, which is why do you think people react so rationally? why do you think people react to the dow and actually hated it when it was at 7 and trading at seven and eight times forward earnings looking out 20 years? >> actually a study of swedish identical swin investors. >> sweden. >> getting very esoterric. >> finnish fraternals. >> no, no, because they're dent cal, they're dent cal genetically. what it found was that up to 50% of our investment decisions are basically genetically wired into us. so we are essentially and can't be educated against, so the poor horsemen are fear, greed, hope andic new orleans, only
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ignorance is something you can address. fear, greed and hope have wiped out more money than any bear market in history. so, you know, we're five gig ga hertz beings in a multi-gigahertz world. we created a society we have a difficult time understanding. so it worked really well out on the savannah, right, there was a tiger, we go, we got to run. it doesn't work so well when you try to make good investments. basically, with reprogrammed to fail. because we let the fear take over. when you look at finance, for example. you look at decision-making under duress, it's all the emotional centers of the brain that are firing. the rational centers of the brain do not fire. so. really the way we've come up with addressing this is obviously to be quantitative investors who have never override. you know, there are other ways to do it. you can do a dynamically
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rebalanced asset allocation where, you know, at its most simple, have you 50% stock, 50% bonds and you say i'm going to let them go within a 15% difference from one another. >> right. >> once they get there, you rebalance them to 50-50. we looked at up with of our most conservative portfolios and married it to intermediate term bonds. it, since '03 it only had two rebalances. the first was in 2006 where stocks were 65% of the portfolio, brought it back down to 50-50. >> okay. >> the second was december '08. of course in december '08, no one wants to boy stocks. >> absolutely. so if we go higher than here. i want to bring you in, you are a chief economist. the fed has been there, we can argue all day whether there is 50-50 fundamentals fed or 80/20. going from here, we know the fed is not going to be around forever backstopping, okay. can the fundamental also stip up
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to the plate? can they step up to the plate and drive markets from here if it will not there as much as we used to have them. >> there is higher and higher. 5% may not satisfy a lot of people. it's about what you should expect. markets long-term average multiples. we got a bit of a sign of upward pressure on the side. we got pretty top loin sales growth in aggregate. i know the numbers in the quarter, stepping back, looking at the big picture, i don't see this economy generating head loin growth rates you need to push the market over the sort of speed private investors want to see. >> i think we better leave it there, don't we? for the moment, anyway. >> coming up, more pain apt the pump, it will get worse. why the summer will see it get more expensive than later. cftc commissioner bart chilton on a key vote today that will affect u.s. banks doing business overseas. we'll be right back oh, he's a fighter alright.
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. >> you go to miami, dodo. >> we doesn't have that in australia. this doesn't exist. okay. still to come. cftc commissioner bart chilton is back with us. in the next hour of the show, former wells fargo ceo elizabeth war reven they will be talking about breaking up the banks, also up next, "squawk box" terminator phil lebeau from the gas staying.
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i like the look. >> hello there, mandy, it's my terminator voice. hey, listen, if you go traveling, you know already you will be paying more at the pump. how much more? we'll show you and how much gas prices have already risen when "squawk box" returns. i'll be back! ve-- tdd#: 1-800-345-2550 playing this and trading. tdd#: 1-800-345-2550 and the better i am at them, the more i enjoy them. tdd#: 1-800-345-2550 so i'm always looking to take them up a notch or two. tdd#: 1-800-345-2550 and schwab really helps me step up my trading. tdd#: 1-800-345-2550 they've now put their most powerful platform, tdd#: 1-800-345-2550 streetsmart edge, in the cloud. tdd#: 1-800-345-2550 so i can use it on the web, where i trade from tdd#: 1-800-345-2550 most of the time. tdd#: 1-800-345-2550 which means i get schwab's most advanced tools tdd#: 1-800-345-2550 on whatever computer i'm on. tdd#: 1-800-345-2550 it's really taken my trading to the next level. tdd#: 1-800-345-2550 i've also got a dedicated team of schwab trading specialists. tdd#: 1-800-345-2550 they helped me set up my platform the way i wanted, tdd#: 1-800-345-2550 from the comfort of my home. tdd#: 1-800-345-2550 and we talked about ideas and strategies, one on one! tdd#: 1-800-345-2550 really gave my trading a boost. tdd#: 1-800-345-2550 all this with no trade minimums. tdd#: 1-800-345-2550
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welcome back to "squawk box," everybody. happy friday, by the way as well. in the headlines this morning, j.p. morgan case reported a quarterly profit off is.66 per share, 16% above revenue and also beat consensus. we will be talking to the chairman and ceo jamie di mon as well. we are about an hour away from the latest producer price index numbers. economists are thinking wholesale prices rose .6 of a percent last month. the exports up .1 of a percent. eliot spitzer who appeared on "squawk box" earlier this week
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met the deadline to be included on the november ballot. the former new york governor submitted the required signatures yesterday. he will be on the ballot running for new york city comptroller. >> i love this. >> you know what, he answered him. and i'm not anti-spitzer. i'm not. he got a 9-point lead. >> he has the guts to come here. >> he's asking for. >> i think i'm there, i think. >> did he win over even more during interview? >> he kind of did. >> i hope he's not a sociopath. he did. >> well, he's a politician. >> yes, it's redundant, anyway, yeah. >> i'm forgiving, i think, if his family is forgiving, who am i? >> it's like the joke that says in this zbrav a lawyer and an honest man and the little kid says, mommy, there is two people buried in that grave. >> it's getaway day for millions of americans. they will be paying more at the
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pump. cnbc's phil lebeau joins us now from chicago with the latest. phil, it was a matter of time where crude is, isn't it, wasn't it? >> oh, absolutely. i think everybody knew we were living on borrowed time, joe. as you talk with people pumping gas, most everybody goes, ah, we knew it was going up a little bit. i don't think this was a long-term surge. here's the average for a gallon of gas. right now it comes in at 3.55. that's according to aaa. compare that to a year ago it was at 3.38. certainly, parts of the country, california is always higher. here in chicago the gas stakes next to me is at 3.97 a gallon. so why are we going to see gas surge as much as 10 to 20% over the next couple of weeks. analysts say most of that spike is due to the surge in oil prices. in fact, we will show you crude oil in a bit. it brings up the question, will there be a lasting impact in
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demapped for large automobiles. specifically, we are talkinging about crossovers and suvs. it's not expected to hurt demand, many analysts believe gas would have to hit at least $5 a gallon to hurt suv and crossover sales. look at this, year-to-date, crossovers, suved outpaceing the industry. 12.9% increase compared with the industry of 8.4%. is expected to continue mainly because they're much more fuel efficient than they used to be and buying an suv is no longer a problem for a lot of people. quickly, take a look at crude oil over the last three months. up more than 10%. i believe it's up 13%. surge in crude oil prices ultimately is going to be felt at the pumplt again, we are already seeing it here in chicago. 3.97. when i talked to a couple people early this morning, they said, eh, we knew it was going to go up. we can live with it at the level it is now, if it surges real high, it might be a different
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story remember guy, back to you. >> we are adjusting, it used to be 4 bucks. we used to talk about that. we are getting used to it. we are adapting upwards. >> we are also, $4 bucks today is 3.50 with inflation. >> it's not the same. you got to remember. it's interesting at this point t. rise in the last few weeks isn't going to hurt anybody. >> oil is edging a little lower this morning while gold is also down for the first time in five sessions. so let's get to our tradeing block. joining us to talk oil is dow larry. oil outlooks and opinions and also we have michael dudas, senior research analyst at stern a.g. carl. >> carl. >> carl. >> great to have you on the show. >> neighbor din go ate the earnings. >> oh. any other offensive? oy. i want to ask you, carl, how much higher are we going on oil
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prices? very simple question. it should be a simple answer. >> a simple answer. we're going to 120 as long as everything stays. egypt, syria, growing the u.s. economy. it's huge there. >> is it more demand or supply that's driving this? >> oh, it's more demand. it's more demand. there is always going to be supply issues. the middle east is always the middle east. as long as the u.s. keeps growing. as long as we see job creation and more income here, we will see more drivers. >> this is a positive thing. this is the result of a positive thing. there is more demand here in the united states, more consumption. however, at what point do we start to see demand destruction? we have driven too high in. >> well, i think it's like, when you said earlier, if we get to $5, we will see inflation. we will see pressure there. unless there is a spike, people adjust. we all get used to it. you say $4 now is $3.55 of five years ago.
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we're adjusting highly slowly. those spikes can hurt us. >> where do you think it has to go before it gets painful? i was saying another 10 bucks would be a hit to consumers. you seem to think we will keep going? >> you know, it's hard to say we're actually going to see any kind of pain at the consumer level. because we're edging back slowly. i mean the same thing with unemployment. it's going back up slowly. so as long as the economy keeps groinding this way and oil prices continue to go back up at this pace. we're not going to see too much on the consumer level, see too much pain. >> let's move on to gold, if we can. michael, i want to ask you about this we have come a hundred bucks off our low for gold. we had a bit of a rebound. everybody is saying, okay the pain is done. the sell-off has been completed. do you believe that? >> i think your term yes. certainly, a market like gold which has been so technically challenged over the past three months, it was just in early april gold prices were north of
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16 an ounts. we will have volatility. as long as the fed starts to taper its tapering talk and the data doesn't support some of the opportunities to withdraw liquidity, i think in such negative sentiment market like gold. >> jeff gunlock known as a bond investor made a great point on apple when he made his short saul. he says, everybody owns it, so there is no one left to by it. it seemed that everybody owned gold. china is now amess. india is a complete disaster economically. who is left to by gold? . >> oh, i would say in the last two years, there has been a lot of people getting out of gold. there has been a tug in the market between the financial etf market liquidation and on the other side the central banks and physical demand from places like china who, you know, the market has been liberalized has become the largest market for gold in the world and india, which had issues with taxes of late should continue to support metals. i think gold is a global mark.
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i think globally there will be a support for gold as long as interest rates don't shoot too high in the united states. >> thank you there talking there on gold and oil. >> coming up, keeping u.s. banks competitive t.cftc will vot on a new capital requirement role for banks doing business overseas. bart chilton joins us to discuss this division to dodd-frank. speaking of banks, a new bill introduced in washington to break up the banks, former wells fargo ceo will be with us at the top of the hour. he's not the one that wants to break them up. these one that will talk about elizabeth moore wanting to do that. more after the break. teaching tools for success, and fostering creativity. .
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. >> a check of the futures for you now. keep in mind the dow closed out a record high the nasdaq closed out the highest since september 29th year 2000. at this stage, it looks like we could get very slim gains at the open, of course, the open is 9:30 eastern. so we got a little way to go. why don't we check out what's happening with j.p. morgan. eps and revenue beat. if you get into the details, it looks like we are negative
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premark. again, jamie dimon will be speaking later today. could move the stock as well. wells fargo earnings are coming out the top of the hour. you got to stick around to find out exactly what they're saying. >> the cntc, bart you are on all the time in the key cftc vote, commissioner bart chilton is with us. i'm not going to say you are on a lot means you are constantly trying to regulate something. you are on a lot. what are you trying to do today? what works you trying to gum up today? >> we're trying to protect the global financial market, joe. don't you see my cape? >> you got the hair. you don't need the cape. the hair looks like a cape. >> today what we are doing is we are doing a cross-border giants for swaps tradeing. so risk knows no bound as we recall from 2008. but what we're doing specifically is we are phaseing
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in our affected dates, which when i co-hosted, you may recall last month, that's what i talked about and i guess people have listened. that's what we are doing. is more cognizant of what's going on around the world. i look at global regulation sort of like field of dreams. remember the voice from the corn says if you build it, he will come. if we in the eu build global mark regulation, i think the rest of the world will come. it's good for markets. it's good for economy. i think it's good for consumers ultimately. >> is this a part of dodd-frank? >> it's required because of that risk no nos, risk knows no bounds, aig, the tradeing was in london. we had to bail out the aig here. it happened the other way around when the lehman brothers went down in the eu. it works on the click of a mouse, risk can change bound ris all across the world. so ultimately what we want i think is a global network of
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fairly harmonized rules and regulations that work sort of in a mesh and work together and that's what we're doing today. this phaseing in is critically important because it doesn't just, you know, have us sticking our eye in the eu or anybody else's face. we are going ahead and doing it in a more hor monized fashion with this phased-in complievenls i hope we pass i. it's not a done deal until it passes a little later. i feel pretty good about it now, guys. >> the rest of the world doesn't like it when we say this is a way you got to do things. since it's in dodd-frank, we got to do it first. we're not saying it's our way or the highway. they're going to say that. >> absolutely. >> well, that's why the phaseing in, joe, makes a little more sense. because we're just going to say okay on this date certain july 12th, today, we're going to do it. you know, everybody has to deal with our rules and regulations,
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but the phaseing in makes it work above other rules. it will take seven, ache months. >> why not say sure, step up. it is our way or the highway. not to be too jinglistic this morning. but the majority of the world's financial transactions pass through the u.s., either through our servers or originate here. we are the world's global financial leader. at least for now. why not set the rules for the rest of the world? >> well, one, we don't have the resources or i think the inclination to put on our blue elevator helmets. it is better to have other people sharing the responsibility. by going first, brain, we are setting the tone for what the regulations should be. even though we put these effective dates in place through next march, by the way, it's our rules that are going into place. so if there is -- if we use
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substituted complierngs if there are comparables overseas, that's type. if they don't come up to our standards, which i i think your point, if they don't come up to our standards, then they will have to abody by our rules. we want to make sure we protect u.s. taxpayers and protect our economy. ultimately the way to do this is to jump in the people more at the same time rather than having us just waiting there several months. >> you don't have a speedo, do you? >> you know what, i don't want to get into it too much i heard about it. >> if elizabeth warren has her way, we don't have to do this, do we? >> i think we need this either way. >> you neff met a regulation you didn't love. >> i didn't want to do bhoif futures. >> that's right. you always bring that up. >> you got to have one, right? >> the vote is in a few hours. i know you said you feel confident. what if it doesn't pass? do you go to the drawing board? do you make concessions? what do you do?
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>> it's mandy all the time. we'll talk to you later today to tell you. >> i'm on "street signs" again. 2:00 p.m. eastern. >> there you go. >> oh, man. >> we just brought up bart. thank you for coming on. thank you for giving us an excuse. we don't get extra pay for getting up extra early. that's our pay the promotion. so again. >> ewant to see. >> bring that up. i notice my ears have been photo shopped down. >> look at that. >> i'm proud of these babies. >> i like the way they were photo shopped up. >> photo shopped up? >> oh. >> we had that. >> did we save it? we had my face. >> let's put joe's face in there. >> that was rough nochlt one should see that. >> guys, producers, can we do that again? >> but as good looking as i am as a guy, as a girl -- it's horrible. >> priscilla queen of --
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>> you look good as a guy? >> thanks. about 3 seconds. >> up next, stocks to watch this morning including, okay, j.p. morgan chase, they reported earlier, wells fargo is due out in 12 minutes. we will do the headlines as they cross. target downgraded, stifel nicolaus. hormel, spam was upgraded by bmo capital markets a. few stocks to watch. bemo, bank of montreal. senator elizabeth warren introducing a bill to break up the banks. the opponent will join us to talk at the top of the hour. then the creator of the bill will join us as well. senator elizabeth warren is here. that should be fiery, to sigh the least. "squawk box" coming right back. good morning. every day we're working to be an even better company -
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and to keep our commitments. and we've made a big commitment to america. bp supports nearly 250,000 jobs here. through all of our energy operations, we invest more in the u.s. than any other place in the world.
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in fact, we've invested over $55 billion here in the last five years - making bp america's largest energy investor. our commitment has never been stronger.
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. >> some stocks to watch. don't use this on "street signs." . >> trademarked. >> stocks to watch, j.p. morgan, banker on the floor 66 a share. we talked about it quite a bit. we had the analyst on. he said there was a nickel here,
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something, 10 cents from bringing the reserve back. revenues beat, though. the buck 60 was above and now the stock is back up. it's been up, it's been down. if you really want to get the inside line on all this, cramer is going to be talking to jamie dimon exclusively on "squawk on the street" later this morning, which is two shows before "street signs." "squawk on the street" is after this show. then there is the halftime report and finally "street signs." spreadtrum is being acquired at $31 a share, a 70% premium. gap reported a 7% increase in june same store sales are better than the 4.7% estimated by analysts. valero expect a second quarter profit of $ .91 below consensus,
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krieth several factors. -- citeing several factors, including higher crude. webmd raised its revenue forecast. a profit based on increased demand. we talk about dell, little carl icahn. >> can i throw it in? soda stream, herb greenberg has been all over this name. herb if you can watch if you are watching on your elliptical there. he's in his speedo. >> him and cramer beat to see who can tweet the earliest. they wake each other up. they probably fall back to sleep. >> you can set those up for auto tweets. >> you are good. you don't think cramer sleeps? he does not sleep, does he? i think he doesn't sleep at all.
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>> he has an active mind. >> jim cramer, i mean this sin sincerely, is the smartest person in my life. >> almost as bergers it seems at times. i'm saying it in a positive way. >> it is a positive way. >> it is a compliment. >> i have a son right there. so it is a compliment. >> is it genetic? mattered down? >> not too funny. there is some indication, it's genetically linked. old fathers, too, unfortunately, seem to be. >> right. i'm going to break this all up for a moment. coming up, breaking up the megabanks. a new bill to do that introduced by massachusetts senator elizabeth warren. he is going to be our special guest on "squawk box." however, before you hear from her defending her bill, former ceo will tell us why it's a bad idea.
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call 1-888-254-2600 today. tdd#: 1-800-345-2550 . >> they say breaking up is hard
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to do. >> we are officially broken up. >> no, george, we're not. >> senator warren will joan us live at 8:po eastern. >> dick kosovich says why he thinks breaking up the banks is a bad idea. >> speaking of wells fargo. we will bring you the analysis. the third hour of "squawk box" starts right now. [ music playing ] indeed it discuss. welcome back, everybody to "squawk box" on cnbc. happy friday, by the way. i'm mandy drewy along with joe sullivan. our guest host jim o'shaughnessy from o'shaughnessy massive management. we have more on the plate. first of all, joe, i want to go to you with earnings news.
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>> we are awaiting the quarterly numbers from wells fargo. let's recap our other big story in terms of earnings. j.p. morgan reported 16% above estimates. revenue beat consensus. earlier, we spoke to a bank analyst anthony polini. >> i don't think the street likes the way they beat. we had some negatives in the quarter, primarily net interest margin, loan growth. about 15% of that headline number probably is sluff. >> and a programming note, make sure to watch squawk on the street at 10:00 a.m. eastern. jim cramer has an exclusive interview with jamie dimon after it's been up, it's been down. it's almost unch at this point 55.10 to 55.14. net interest income was a little light. they brought back some reserves, which, you know, they get penalized when they put the reserves away, they don't get credit benefit e when they bring them back.
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part of that 1.60 is in reserves. some think it's closer to inline. however they decide to bet they did beat. wells fargo, i haven't had a chance to look at this are you doing this? >> i can bang it out. 93 cents which looks to be pretty much inline. i seen estimates 92, 93. quarterly revenue 21.1, so a slight beat there according to one consensus on the revenue side. if you look, however, at their gap number, it's going to be 98. so i guess on that basis, you could say they boat. we are given two headline numbers, 92 and 98. the problem with bank earnings is there is so much thrown in. these releases are massively long. there is a lot of accounting. i don't want to call it trickery. >> trying to break them up. >> 93. also a 98. still revenues. they set their second quarter revenue at 21.2 billion. which is about 2 billion less
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than they made last quarter. wfc. there you go. >> did you do revenue? i didn't hear. >> 21.4 which is slightly better than the revenue consensus of 21.1. >> you don't have a net interest, you didn't have an estimate on that? >> i'm trying to get the actual release. what i got is a bunch of headlines here. once i get the actual press release, i'll dig in. why don't you do that? >> the greatest way is to look at the trade. 41.72 to 41.85. it's slightly below where it closes. >> there we go. free market ever so slightly lower. 0.1%. >> some people don't know what they're doing. the people that do this, that trade it for a living know every metric, every expectation. they know exactly whether things are good or bad. let's see, net charge-off, 1.2 billion down from, down a billion from the last time they
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reported. a. >> going forward, you got to watch mortgage originations. that's huge. >> the number one earnings. they're much bigger for them than for j.p. morgan. >> absolutely. >> they own all 12 of my mortgage, i think. i will dig in there. among the other top stories i'm following. i'm kidding. comments from investor carl icahn late yesterday suggests a new offer for dell could be on the way this morning. a dell special committee rebuffed icahn's suggestion, they seek outside appraisal of the company's value. meantime, a 1.8 billion dollar takeover in the semi conductor industry. chick designer spreadtrum communications to be bought by china for $31 bucks per share by tsinghua. >> it was under the radar on street talk.
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spreadtrum? ever heard about that now everybody will be hearing about that. >> we are wrong 100% of the time t. dow an s&p closing at sex highs, all time highs, all 30 dow components closed in the green. u.s. equity futures this hour indicating maybe a slightly higher open. a little bit higher on fear of value. if you are listening on the radio, we are up one point imd implied to the s&pment still better gren tan red i suppose. let's take a look at what happened overnight in asia. that was a mixed market t. only mark up there was the nikkei 225, up about one-quarter of 1%. still tradeing in europe on a friday the footsy. >> bryant, i finally kaumd down from last time. >> it's working you up. the german dax, they're all higher, fears around portugal. portugal has become the new. i know people say why are you talking about that? portugal has become the new greece.
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a lot of concerns it may be the first european country to leave the euro zone. >> it won't be greece. it looks like it might actually be portugal. >> not only do people worry about spain after portugal and maybe italy. portugal to me looks like it's a part of spain. i don't know how they got a company in there. right there, isn't that spain? >> it's right there. on the western side of spain. you know what, if you stick to the port gear, are you a part of spain. you will start a war. >> you know whose idea it was? the people that spoke portugese instead of spanish. they decide, hey, we don't speak your language. >> the peninsula should have been one thing. >> i think. >> you know, they can run their -- >> it's a part of australia. let's just change the world map. >> they can run their affairs. >> new zealand was supposed to -- >> sorry kiwis. i love you all. >> senator elizabeth warren will join us in less than 330
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minutes. the former wells fargo chairman and ceo joins us now. i don't know, dick. you know, what i looked up for this and we're going to talk to our -- i looked up how many times the house has voted to repeal obamacare. it's 37 times. now, she's going to do this i don't know, there is no chance cisco is anywhere. have you figured out why politics do this when it goes nowhere is it like tweeting? you sort of want someone to know what are you thinking? what is it? >> it's very misguided. the facts are that investment banking is probably the least ricky of all financial products. far less risky tan consumer lending or commercial lending. think about it, joe. what's the risk of using your best efforts to underwrite bonds and equities? what's the risk of mna advice? what's the risk of buying an
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selling securities for customers? >> right. >> you know, it's just not, the basic business is not ricky. now, if you put a hedge fuvend inside an investment bank, then you got problems. why would we want to recreate the very company that caused the past financial crisis? you know, we want to keep people on the reservation. we want their bank holding companies today. they're regulated by the fed and the old cc. you want to have them in the shadow banking system and create another crisis? for the life of me, i do not understand how, why anyone would want to recreate the very company that caused the past financial crisis. >> people at home say what does this guy that makes bleach know about banking? are you on the board of clorox or something? >> me? >> yeah. >> no. i was with general mills a long time ago. cheerios. >> look behind, we got clorox behind you.
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people at home are thinking, this guy makes bleach. i don't care what he says about glass and steel. >> they are a good customer. >> go ahead. >> i was going to ask you, which got senator warren on our show in about 20 minutes time, dick. what would you ask her? >> i'd ask her, what is the risk of underwriting bonds and equities of giving mna advice of buying and selling securities, helping our companies hemorrhage their foreign exchange risc, their interest rate risks, their commodity risks, compared to lending, making commercial loans and consumer loans when we help them with their capital stack, through capital market. we actually make sure that they have the proths proper capital and right risk so they can pay back their loans. so i have no idea how, why she would think it is more risky in
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the capital markets? >> dick, it's brian sullivan. with all due respect. you know the answer to that question already. she is going to point to 2008 and say, there's the risk. the financial market system will get out of control. it will destroy big banks. it will shut down the credit for the company. >> it's all tear terms. >> that's what happened. that's what she will point to. credit will dry up, because banks are broke over here. they can't do their fundamental core business of lending. >> let meance that. that that's why we had the problem is because we gave the exclusivity to the capital markets to these investment banks who use the profits from that to then do a lot of proprietary trading. let's look at countries who do not have large investment banks and ask what happened to them during the crisis? canada, australia, asia, latin america, they have basically commercial banks in those countries in the capital market. they have not ever had a
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financial crisis like the one we had in the united states. >> dick, how much worse would it have been for uncle sam if bank of america wasn't there to buy countrywide in maryland if j.p. morgan hasn't absorbed bear stearns. how much more would it have cost -- how much bigger a target then? >> it would be billions of dollars t. point is, we have already done that. why would you want to recreate the very companies that caused the crisis and had to be bailed out? it makes no sense. >> the other thing is i mean now this is pretty funny, i'm looking at a quote from my colleague, my illustrious co-anchor. i may use this from dealbook from andrew. he said, here's the key, they wouldn't have prevented the lost financial crisis. it would not have prevented j. pm morgan's 2 billion plus in
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trading. what will she tell us the rationale is? i guess it's a knee-jerk response? she may cancel after all this? >> just ask her those questions. i can't imagine what the answer would be. >> in fact, andrew, asked ms. warren about whether she thought the financial crisis or j.p. morgan's losses could have been avoided if glass stealing were in place. she told andrew the answer is probably no to both. >> exactly. >> that's by czar. some people like publicity, i think. >> i was wondering, i'm going to make it bipartisan, 37 times the house votes to repeal obamacare and they're probably going to do it again. >> people people you know this, people are still angry from 2008 because many people, the banks destroyed the economy. >> they feel stung. >> is that usually a good reason to do things? you heard him say -- >> i'm not defending her action
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of this bill. >> you are playing devil's advocate again. >> doing what her constituents voted her in wanted her to do. >> here's the misinformation. here's the misinformation. 20 financial institutions caused this crisis ten were snl now non-exist and under the occ. another ten were investment banks which were not regulated as they should have been by the sec. the only commercial bank was citicorps who morphed into an investment bank. commercial banks did not create this crisis. >> well, dick. >> at least it's a way to maybe the center warns things, this is one way of cutting down on the size and systemic risk. if you split them up, at least they will not be big enough to bring the system down. that's denying that there is any positives that come from size
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when you are a global entity. >> let's go back to the ten originators. they weren't big. new century and so on. let's go back to to the snls. none of those were big in the 1980s, they all failed. >> quickly -- >> there is no relationship between size and risk other than if you are taking on other risc and big is worse. but i can tell you i -- when i started running norwest, it was a $20 billion asset bank in the mid-west. it almost failed. it contemplated. today wells fargo is $1.4 trillion. wells fargo is much less at risk of failing than it was norwest back almost did fail when this was 20 billion because it's diversified. diversified geographically. >> all right.
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dick, thank you. what do we got? you stay tuned. i wish we could keep you. you can talk as to her, too. she might not want to talk to you with one of those fat cat exbankers. you know what, she might be talking about clawbacks. we'll see you later. thanks. coming up, as we said 8:po eastern, massachusetts senator elizabeth warren will be our special guest. seal tell us all about this new bill. with you, i need to know when it's you and when you are just doing that. is there a signal you can give me or something? >> yes, my eyes are opened. i'm breathing. >> i don't know within your lips are moving, you are lying. >> it's a lawyer thing again. >> it's doing your devil's advocate. >> why do people have to be in the box? a black and white cookie. forgive that, man. >> red or purple. >> exactly. you can be pro choice, pro gay marriage, pro legalization of pot and conservedly --
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>> why not? >> kaunt be pro and -- >> are you both. you are doing both. >> old things to all people. >> all things? what the heck is that? i'm talking about this whole doingma. >> you are like your mother, your sister. >> i don't know kwa you are. >> easy, chinatown. >> this is what i'm missing. anyway, don't miss jamie dimon and an exclusive with jim cramer 10:00 eastern. >> i love it. up next, wells fargo reporting just minutes ago, we will speak with analyst david helder about the company's report t. stock not moving humid. it's up .2, elizabeth warren coming up. will be the biggy of the morning, folks. you won't want to go anywhere. more martin scorcese reference. we are back
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. >> wells fargo reporting results moments ago, with us is the managing director. david what did you think of the
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numbers? >> i think wells fargo reported a great quarter, it was 98 cents vs. the consensus of 93. we saw that mortgage banking revenue really didn't change at all from the ferc. credit quality improved dramatically. >> you said it was a great quarter. if you take a look at the free park, there was no reaction whatsoever. it feels as long as the market is concerned, it was wasn't a great quarter. it was a blah quarter. >> i don't think anybody who looks at the numbers would actually agree with that. again the market i think over the last few days has been anticipating a good quarter from wells and a number of the other banks and, you know, the whisper number such as it is might have been closer to the 98 cents they reported. but 98 cents vs. the consensus of 93 is a good result. >> net income higher than expected. non-interest expense better than expected. here's the number that stand out to me.
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tell me if you agree spectacular. there is no other way to describe it. the prediction for credit losses was $652 million t. prediction or the consensus was 1.2, so their writeoffs for future losses were half of what wall street was expecting. >> yes, as i said, the credit quality improved dramatically. i think that is the most important factor over bank earnings. they did release about $500 million of reserves which is why the number is so much below the consensus that you refer to. if you look at cardinaloffs, which are the actual losses, they were only vague basis points of loans down from 115 basis points just a year earlier and down from 72 basis points in the first quarter. so there is a real dramatic improvement in credit quality that continues. i think a lot of people thought, oh, you know, five years after the financial crisis began, we were at the lowest possible level of loan losses.
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actually, we are seeing at j.p. morgan and wells fargo, credit quality continues to get better. >> as you have been speaking, dave, we have been watching the premarket. it seems to be moving up slightly. i want to ask you. we have been talking about the fact that wells fargo has a huge business going forward the biggest in the country. yeah, so what happens with that? what happens to the mortgage lending market at wells fargo in light of the fact we have been seeing a spike in mortgage rates recently? >> well, clearly, we financing volume will slow down. will have some impact on the third quarter. but i think what wells pointed out is that their purchase originations were up 44% in the second quarter versus the first quarter. so slowly but surely and actually 44% isn't slowly, dramatically, new money purchases are taking over from refinance as the driver of mortgage origination activity. >> dave, we got to leave it there. free market.
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we are up 1% for wells fargo. thank you very much for joining with us your thoughts. >> happy to do it. >> coming up, economic data the june ppi. producer price index. >> the indian company tata goes together, joe. >> who doesn't. 8:30 eastern. then senator elizabeth warren leading the charge to break up the bing banks. she will join us live. now as we head to break, former citigroup sandy wile said about break up the banks on "squawk box" a little less than a year ago. >> i think what we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans and have banks do something that's not going to rick the taxpayer dollars that's not going to be
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. >> welcome back to "squawk box," everybody. the double at the beginning of the month. senators balked at the $122 billion price tag on a deal that would have guaranteed student rates would stay below 7%.
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now back to square one, folks. here's the good news, twimpgs can is are back. twinkies back in two minutes in stores movenltdz walmart struck a dole to get first run twinkies on shelves this week. walmart stores are hosting midnight events for twinkie fans. they will be available on sunday at 12:01 a.m. the hostess owner is launching an ambition growth plan. i did also hear they have the longest show flight now. breaking economic data, minutes away from the ppi numbers for june. then our news-maker of the morning, yes, senator elizabeth warren on her be ill to try to break up the megabanks. you must stick around. it's a must watch interview. you think about risk. i don't like the ups and downs of the market, .
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. >> good friday morning. we are about 25 second away from the producer price index data
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for june. u.s. equity foouts futures are slightly higher coming off yesterday's record close. all time highs the dow and s&p are a long ways away. rick santelli is standing by in chicago. guest host jim o'shaughnessy is with us on set. rick you have three, two, one, two, give us the numbers. >> here we go. june ppi up .8 of 1%. don't worry. there is no priceing pressure. yes, up .8. take out the all important underscore all important food and energy, you are up .2, both of those numbers are a little hot. just to give uconn tech, our last look at ppi was up .5, that is unrevised. those are month over month, let's open it up, year over year, up 2.5, that's hotter, we're coming off a 1.7. we are expecting closer to 2% if we strip out once again, look at
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core year over year, many were looking for 1.5, most up 1.6. it exactly matches our year overlook at 1.7. the cousin, of course, cpi coming out next week. we still have university of michigan sentiment index. that's always fun now because of the whole, you know, proprietary information. can you sell it? can you not sell it? so this is going to be very interesting to continue to monitor all of these kind of subscription type indices. we closed at 274 last week. currently at 256. we have seen lower yields. so you blur your eyes. we're about 20 basis points, 18 basis points below the high closing yield still above 2.5%. well above some of the levels of the brightest and the best carved out as territory for dropping rates at the last fed meeting. you know, we always need to keep score. back to you. >> all right, rick santelli. thank you very much.
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we will keep an eye on that ten-year note. that's been the story, right, jim o'shaughnessy? we are historically low. spike so rapidly and violently some would say. >> yes, that's run of the reasons we are writing the commentary called a generational selling opportunity for long bonds. we think that when if you look. we look at very long return patterns. so, we look at 40 years and we say, okay, what anomalous things are happening? and one of the first things that we see is going back to 1,900, if we had a histogram here and you were looking at the return the 40-year return to the long bond and you looked at 4 percentage a year plus in 2007, there are no numbers there. then we move into the crisis and suddenly you see the long bond earning over 4%. in fact, it's just hit its
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highest 40-year high of 4.5%. that happens 6% of observations back in 1,900. actually, the second thing we saw was that in february and march of '09, not only did we come in with the second worst equity performance, but for the first time in history, the long bond outperformed the stockmarket. not by much. acumulatively in february. 6% cume livety in march. but these kind of things offer really kind of regime changing opportunityts. ordinarily, we would have written this commentary seven years ago, but qe was mucking up the system. so basically what we have right now is we have the long bond 3.5 standard deviations above its normal place. when you look at reversion to the mean that, is a reading that is so far off the charts that it
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is terrifying. so what we're telling investors is and now thanks to bernanke, they don't have to rush to do this. but if you are in long bonds, swap them out for short term. >> let's get to ups. ups is lowering guidance, stocks down over 3%. it's interesting when a bellwhether like this in a transportation component says something like citeing, slowing u.s. industrial economy. slowing u.s. industrial economy and lower yielding shipping solutions for its clients and now sees 4650485 in the second quarter of $1.13. it had been a $1.20 is where estimates where also 465 is well below the full-year analyst's estimate of 498. so you know fedex last time talked about people not necessarily paying up for the premium stuff where it
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absolutely positively has to be there the next day. they seem to be saying a little of that. i thought the slowing industrial gh that is dire. to your point, joe, the other thing they cited is increased customer preference for lower yielding shipping solutions. in other words, get it there in four days, not two. we'll pay less, we're not in that much of a hurry. the monkey will survive. cut the holes in the box bigger. >> that's cruel. >> wow, are you hard for me to get my arms around. >> i am hard. i am very wide. >> now we're worried about that. you would do that to a monkey in a bucs for four days? >> no, i'd do it overnight. >> all right, is senator warren ready, okay. good, senator john mccain and elizabeth warren are teaming up to break up the megabanks. joining us now is massachusetts senator elizabeth warren. i always used to call you professor. if i called you professor, is there anyone else in the senate
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that was a professor? there isn't, is there? >> i don't think so. >> you want me to call you senator or professor? >> senator is fine now. >> senator is good. now, i'm not going to say because you used to come on "squawk box" all the time that we vaulted you into your current position but, obviously, it didn't hurt. i'm getting to something. you did this on your own? >> but there was that "squawk box" bump. >> that's what i'm talking about. listen to how i will lead us into what we talk about. >> okay. >> at the same time just because glass steegele was repealed in 1999 doesn't necessarily mean thatting a gova had anything to do with causing the crisis, right? >> right. right. i'll give you that. because the problem started a whole lot earlier. we go through the history of this you remember great depression, 1933, one of the solutions was to say we're going to separate ordinary boring
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banking checking account, savings accounts from all the other clients, investments, the high risk. you can do both of those. you just can't do them in the same institution. okay, fine. build a big wall between the two. let's face it, the banks wanted access to the high profits you get from doing that trading. the traders wanted access to those deposits. so they kept hammering on walk to change it and regulators started changing it in the 1980s and they started creating loopholes in the old glass steigelling a so that finally in 1999, congress got rid of the whole thing. but it was a shelby then. and so, what happened? we have the big crash in 2008. what does everyone, including folks on "squawk box" say about it? they say too much concentration in financial services creates too big to fail. puts us at bigger risk. and what's happened since 2008?
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the four biggest financial institutions are now 30% bigger than they were in 2008. >> senator, so this is all apples and oranges, though. every one of the banks, that ones involved, bear stearns, lehman, countrywide, wamu, indy mac. ing. they aren't the ones you are talking about t. ones are you talking about are the runs that were able to absorb the problems we had in the bank of america. what would we have done if they didn't absorb countrywide and peril, if j.p. morgan hasn't absorbed bear stearns and wamu didn't help with us wachovia, we'd be worse off. >> let's unpack that a little bit. look at the pieces we got here. remember that what this is about is whether or not the people who want to do the big tradeing should be able to get access to deposits? right. and that's part of what droves tarp and what drove our bailout was the fact that we had the
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depostory institutions were also at risk. >> but that was from their normal lending. a lot of that was from the subprime bubble and the housing bubble. >> i'm sorry. yes, it was about their mortgages, be you it was also about the kind of instruments they were working in and how they loaded up on risk. but at the end of the day, there is no single magic bullet that's going to stop too big to fail. that's a part of what kweef learned. will is a lot that's going on there. but the central premise behind a 20th class stiegel is if you want to take risks, you can't get access to fdic insured depot ises when you do. by itself a little bit helps bring down the size of some of the financial institutions and it says at least one portion of our banking sector stays safer.
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and i think that is a good thing. it moves us in the right direction. it doesn't fix everything by itself. it doesn't pretend to fix everything by itself. but it moves us in the right direction. and that's what we want. >> senator, i will just jump in here. >> sure. >> and ask you what you would say to the krichls of your bill. we were speaking to chris weill. he said it would be hugely disruptive to improve this new glass stiig him he says it would hurt credit creation, which obviously in turn would hurt the economy. what would you say, for example, to that? >> you know, that was pretty much what the banks were saying in 1932 an 1933. they kept saying, no, no, no to glass steig him. they raised all kind of objections to it. they kept hammering away at it because they wanted to be able to get access to those deposits in order to fuel more speculative trading. and what this says is no, we can't do that.
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if you are going to have fdic insurance, you are going to have savings accounts and checking accounts. they really do have to be walled off. remember, we have 50 years following the passage of glass stiegel in which we had a tiny number of bank failures. whole boom and bust cycle from 1797 to 1933 went away. and in that period of time, we built a strong, ro bust middle class. what happened is we started chipping away and part of the chipping away at that was to say load up the banks with more and more risk. get them more integrated and let them get bigger and bicker. and when they happened, we were in the position of having to bail them out when they got into big financial trouble. >> senator, i will push back, though, on the relative security that are you portraying them to have given us because continental illinois in the early ''80s was the 7th largest
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bank in america. it failed, almost sent off based another major banking crisis. shouldn't we just tell the american consumer no matter what we do, there will be bank boom and cycles. you can't protect everything. >> no, that is just wrong. >> why? >> look at the history. >> we are filled with booms and busts to now. >> from 191797 to 1933 the american banking system crashed about every 15 years. in 1933, we put good reforms in place for wis glass steigel was the centerpiece from 1933 to the early 1980s, that's a 50-year period, we didn't have any of that. none. we kept the system steady and secure and it was only as we started deregulating. you start hitting the snl crisis
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and what did we do? we deregulated some more. then have you long-term capital management at the end of the '90s. what did we do as a country? this country continued to deregulate more. and then we had the big crash in 2008. you are not going to defend the proposition that regulation can never work if it did work. >> i didn't say regulation never worpg, by far and away, i agree, there were fewer bank failures this that time. >> the wig once were zero. >> continental illinois was the seventh biggest bank in the united states. >> it took 50 years to get there. we had 50 years of peace. >> glass steigel would not have prevented the financial crisis. >> but itself, absolutely right. what it can do, it request wind some more of the rick out of the system. it can help bring down the size of the largest banking institutions. don't forget, you sit said, there was too much concentration in the banking industry in 2008.
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now here we are in 2013 and the big four are 30% bigger. puts too much risk back in the system. >> there are other ways of shrinking them, obviously. >> with all due respect, senator, every report i read, every person i have spoken to says there is a very slim chance of this passing. >> well, let me put it this way, if you don't fight for it, the chances are zero. remember who my partners are in this one. i got john mccain standing with me. i couldn't ask for a better fighter. we've got maria campwell, angus king, a democrat, a republican, an independent, all people who are willing to get out there and fight. >> you know what the prospects are. the house voted 37 times on obamacare to defund it. i mean, is this any different? you are making a statement. but we want congress to do things that actually have a chance of happening and become law. it seems like more of the same. go ahead. >> i was going to say, you know,
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i remember going on television multiple times, including here, when i talked about the consumer financial protection borough. when the big banks were spending more than a million dollars a day lobbying against it. and when everybody told me, you will never get that thing through, why are you even trying? the chances of passing it are slim to none. yet, look around. we now have a good strong consumer financial protection borough. it's recovered a half a billion dollars for families who got cheated. it's out there working on behalf of military families, on behalf of senior, on behalf of students. without that agency, because we got out an not for it, i actually believe in. all right. we have to leave again. your passion has not changed. >> no. >> we like seeing it. you have grown into the job. you are looking great. >> thank you. >> and i mean, the senatortorial
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way. you are look great. maybe less senatortorial. >> that's maybe a complement. >> just the right amount. i'm geting out of here. thank you. >> you dug yourself into a big hole. >> i don't know why. >> you will have to make it up to her later on. coming up, cuba has done something it has not done in decades, invited journalists into the country. in fact, our very own michelle caruso cabrera is there. she joins us with more. >> reporter: hey, guys, greetingings from havana, cuba. in need of a coat of paint. like you said, this socialist government doing something it hasn't done in decades. it's invited business generalists to come do stories about the economy. what is up with that? we'll tell you on the other side of this break. don't move. commitments. commitments. and we've made a big commitment to america. bp supports nearly 250,000 jobs here. through all of our energy operations,
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we invest more in the u.s. than any other place in the world. in fact, we've invested over $55 billion here in the last five years - making bp america's largest energy investor. our commitment has never been stronger. oh, just diagramming this accident with my state farm pocket agent app. you can also get a quote and pay your premium with this thing. i thought state farm didn't have all those apps? where did you hear that? the internet. and you believed it? yeah. they can't put anything on the internet that isn't true. where did you hear that? [ both ] the internet. oh look. here comes my date. i met him on the internet. he's a french model. uh, bonjour. [ male announcer ] state farm. more mobile than ever. get to a better state. ♪
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. >> the normally secretive government has done something it hasn't done in decades, they've invited strangers, business journalists. that's weird for a country that hasn't allowed private sector business for 50 years. cnbc's chief correspondent is one of them. the perfect person with her cuban background. she joins us now live from havana. i guess this took you a little by surprise, right? >> yeah.
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the phone rang two weeks ago. i was extremely surprised. because cnbc and i have been requesting for a decade now permission to get journalist visas to come here and do stories about the economy. the cuban government never said in were for big events like the pope and president carter's visit where they felt like they had to let all the journalists in. so it was very surprising to get that call. who's here and what did we see? we're not the only ones here. there's two reporters from "the economist" magazine. there's reporters from europe and latin america, business journalists as well. they showed us businesses that have started to grow here in cuba because of a new law just a couple of years ago that allow private businesses to exist. self-employed people can begin businesses. so they showed us, for example, a shop dedicated, started by a woman, dedicated to manufacturing and selling clothing, dedicated to the religion here, it's very colorful.
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you can see in the back, she had three women working on 1950s-era singer sewing machines. think about that, one the shining kpmpls, they wanted to show us, was a business showing 1950s-era sewing machines. they also provided an air-conditioned bus for all of the journalists we desperately needed. most of the buses are not. we were all subjected to a very boring press conferences. keep in mind those are necessary because cuba doesn't belong to the imf or the world bank. it hasn't published reliable statistics in years. we don't know their foreign exchange rates, nothing. the only time you ever really get information is if you see these guys in person, and you hardly ever do. that, for example, is one of the reasons why michael reed, america's editor from "the economist," came. take a listen. >> if you're lucky, they will give you a journalist's visa, but you can talk to cubans on the street, but it's very hard to get access to official sources, so it's interesting to
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come for that reason. >> reporter: now, throughout this whole process, the cubans were at pains to say that they are not abandoning socialism. in fact, we are showing you two big billboards in that are in the city that say the changes that are happening in cuba are for more socialism. they're making these changes to create sustainable socialism. they cannot admit that this is part of creating a market economy. and i'll tell you, there's a lot of skeptics here who say it's never going to be enough. there are little, little changes. they could be meaningful. guys, we don't know what they mean yet. back to you. >> when you get back, i want to talk to you about it on air what a tragedy and what a great example of what happens when socialism to a country that if there had been no castro, the type of country that would be. some people that hate globalization look at cuba and say that's the way it should be. others see what the godfather, too, envisioned in cuba and it it would have been a mecca of american tourism and all those
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people would have benefited. >> i'll be in for becky on monday. >> let's talk about it because it's a tragedy and something you can look at to what see happens under socialism. anyway, thank you. coming up, we're going to check in with jim cramer on that bill to break up the banks. you just heard from senator warren, earnings from wells fargo. this morning's stock to watch. stick around. second trade execu, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.
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welcome back to "squawk box." breaking news on dell, as expected, carl icahn is sweetening his offer for dell. under the proposal, dell would self-tender for 1.1 billion shares of dell stock in exchange for $14 a share. plus one warrant for four shares. each warrant would entitle a shareholder for a period of seven years to purchase a share of dell for $20. it's complicated. >> yeah. total value according to icahn would be $15.50 to 18 bucks a share. he's far smarter and more successful than i'll ever be. but if you're icahn, the problem, to your note, it's too complicated. you're getting 14 in cash, plus this stab. icahn, if you're listening, just
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make it a cash offer, forget the stub. >> it's amazing the fighting over this company. who would want it? this is like a dying industry, isn't it? >> no, it's throwing off cash like a mad man. the last word from our guest host, jim o'shaughnessy on the somewhat half-irish day on "squawk box." one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. awarded five-stars from smartmoney magazine. for the strong and the elegant. for the authentic. for at home and on the go. for pessimists and optimists. for those who love you a little and those who love you a lot. for ultimate flavor and great refreshment with or without calories.
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thanks to jim o'shaughnessy and brian. my grandmother was rosie mcgraw. thanks to you, the illustrious aussie. aussie for beer. anyway, "squawk on the street" is next. ♪ everybody get up snoet good friday morning. welcome to "squawk on the street." i'm carl quintanilla. what a morning shaping up. futures are steady but the news flow is strong. earnings from jpmorgan, wells fargo. a warning from u.p.s., a flurry of stock downgrades elsewhere. pay attention to the ten-year yield, too. it is down about to basis points for the week. that is the biggest decline in more than a year.


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